Diep N. Hoang v. Commissioner of IRS

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-14398
Non-Argument Calendar
________________________
Agency No. 024221-10
DIEP N. HOANG,
Petitioner-Appellant,
versus
COMMISSIONER OF IRS,
Respondent-Appellee.
________________________
Petition for Review of a Decision
of the U.S. Tax Court
________________________
(May 2, 2014)
Before HULL, PRYOR and MARTIN, Circuit Judges.
PER CURIAM:
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Proceeding pro se, Diep Hoang petitions for review of the United States Tax
Court’s decision upholding the Internal Revenue Services’s (“IRS”) determination
of his income tax liability for the 2006 tax year. After careful review of the briefs
and the record, we affirm the Tax Court’s decision.
I. BACKGROUND
A. The IRS’s August 2010 Notice of Deficiency
Hoang’s individual tax return for the year 2006 was due on October 15,
2007. But Hoang did not file a 2006 tax return until much later—on September 2,
2009, to be specific. This belated tax return reported an adjusted gross income of
$22,921.19 (including dividends of $19,027.84 and capital gains of $2,891.19) and
a taxable income of $13,221. Hoang left blank the fields for taxes paid and taxes
owed.
The IRS was dubious about the accuracy of Hoang’s 2006 tax return—
particularly the reported gross and taxable income. Various different brokerage
firms submitted to the IRS Form 1099s which indicated that Hoang received a total
of $14,855,797 in proceeds from sales of securities during 2006.
Given the large discrepancy between the income reported in Hoang’s tax
return and the sales proceeds reported by Hoang’s brokerage firms, the IRS issued
a notice of deficiency for the year 2006. The IRS notice, dated August 3, 2010,
contained the following determinations: (1) a deficiency of $5,188,587 in income
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taxes for 2006; (2) an “addition to the tax” of $1,297,533.50 for failure to file a
timely return; and (3) a penalty of $1,037,717.40 for understating the taxable
income on the 2006 tax return.
The IRS arrived at these figures by treating all of Hoang’s sales proceeds
reflected in the Form 1099s—i.e., the entire $14,855,797—as capital gains. The
IRS did so because there was no information about the cost basis for the
securities—in other words, there was no evidence about how much Hoang had paid
for the securities he sold in 2006. Absent such information, the IRS treated the
entire $14,855,797 as capital gains. With that premise, the IRS calculated that
Hoang owed $5,188,587 in income taxes for 2006.
On top of that income-tax deficiency, the IRS assessed two penalties: First,
the IRS added a 25 percent charge (or $1,297,533.50) because Hoang filed his
2006 tax return in September of 2009, which was long past the applicable due date.
Second, the IRS imposed a 20 percent penalty (or $1,037,717.40) because Hoang’s
2006 tax return significantly understated Hoang’s income.
B. Hoang’s Petition in the Tax Court
Hoang responded to the IRS notice by filing a Tax-Court petition disputing
the deficiency. Proceeding pro se, Hoang contended that the IRS’s notice of
deficiency was “totally invalid and illegal” for several reasons: (1) the IRS was
not authorized by the Internal Revenue Code to issue the notice; (2) the tax
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increase was fabricated; (3) the IRS failed to meet its burden to prove the legality
of the notice; (4) the notice “was designed to cover up the fact that [the IRS] was a
self-convicted perjurer”; and (5) the notice “was issued to retaliate” against Hoang
for reporting that the IRS committed perjury in a prior controversy between Hoang
and the IRS.
Hoang also attempted to state a “counterclaim/charge” because “the issuance
of this [notice] constitute[d] a criminal act disguised as tax collection.” Hoang
demanded that the IRS pay over $75 million in fines and damages for its conduct.
C. Discovery
As litigation commenced in the Tax Court, the IRS made multiple attempts
to verify the accuracy of its notice of deficiency. Specifically, the IRS served
several discovery requests on Hoang to obtain information about his cost basis—in
other words, how much Hoang had paid for each of the securities he sold in 2006.
With that, more precise calculations could be made as to what part of the
$14,855,797 in 2006 sales proceeds were, in fact, capital gains.
The IRS’s first attempt was a request for admission asking Hoang to
concede that he did indeed “receive[] $14,857,461 in capital gains during the 2006
income tax year.” 1 As an attachment to the request, the IRS provided Hoang with
1
The IRS calculated a total of $14,857,461 in capital gains by adding the reported
dividends and distributions Hoang received during 2006 ($1,664) to the reported 2006 sales
proceeds ($14,855,797).
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a detailed and lengthy list of securities sales Hoang made in 2006, including the
respective sales dates and proceeds of each sale.
Hoang never properly answered this request for admission. Instead, he pro
se objected to the IRS’s request as unconstitutional. The Tax Court overruled this
objection and ordered Hoang to file an amended response. In lieu of answering the
request, Hoang asserted that the Tax Court lacked jurisdiction because the IRS’s
notice of deficiency was issued on August 3, 2010—more than three months after
the applicable statute of limitations allegedly expired on April 15, 2010. Hoang
also explained that there were “no more documents to be used at this late time
because all of them were discarded after [April 15, 2010].”
The IRS then moved to deem the matters stated in the request as admitted.
The Tax Court deferred its ruling on the IRS’s motion until after trial and
specifically warned Hoang that he must present evidence of a cost basis for the
securities he sold in 2006. This was not the first time the Tax Court issued such a
warning: in denying a motion filed by Hoang, the Tax Court stated in writing that
Hoang had “accomplished nothing positive through the multiple motions he has
filed; henceforth, he might care instead to prepare for trial by focusing his energy
on amassing evidence of his basis in capital assets that he may have sold or
exchanged during the year in issue.”
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Hoang also had further opportunities to provide such cost-basis information
during discovery. For example, the IRS served on Hoang a request for production
seeking “all documents reflecting your cost basis in each of the securities sold by
you during the 2006 income tax year.” Similarly, the IRS served an interrogatory
asking Hoang to provide a list detailing any cost basis he may have for any of the
securities he sold in 2006. But Hoang did not respond to these requests.
Having received no valid responses to its inquiries, the IRS served on Hoang
a proposed stipulation of facts. As part of this proposed stipulation, the IRS
included the same detailed list of all securities Hoang sold in 2006, along with the
date and proceeds of each sale. After Hoang refused to stipulate to the proposed
facts, the Tax Court ordered Hoang to show cause why the proposed stipulation
should not be accepted as established. Hoang pro se responded by generally
denying the correctness of the stipulation of facts and disputing the Tax Court’s
authority over him. Concluding that this response was “evasive and not fairly
directed to the [IRS’s] proposed stipulation,” the Tax Court ordered that the
proposed stipulation of facts was “accepted as established.” This meant Hoang
stipulated that he received $14,855,797 in total proceeds from the sale of securities
in 2006.
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D. The Trial
As the case proceeded to trial, the Tax Court asked Hoang the critical
question of this case—whether Hoang’s 2006 sales proceeds of $14,855,797 were
indeed capital gains. The Tax Court explained to the pro se Hoang that it would be
in Hoang’s best interest to present a cost basis for the securities he sold in 2006.
In response, Hoang stated that he did provide the required cost-basis
information to the IRS along with the 2006 tax return he filed in 2009. But,
according to Hoang, the IRS threw it all away.
Hoang then presented Exhibit 4-p, a 13-page document containing
fragments of various other documents. The first two pages of Exhibit 4-p appear to
be duplicates of one page of the IRS’s August 2013 notice of deficiency—with
several added hand-written comments. The third page of Exhibit 4-p is difficult to
decipher: the bottom appears to be part of a Form 4868 Hoang filed on April 14,
2007 to request an extension for his 2006 tax return; the top of the document states
Hoang’s reasons for the requested extension.
The fourth and fifth page of Exhibit 4-p are fragments of a document Hoang
ostensibly filed with the IRS on Oct 15, 2007, a Form 1040 with most fields left
blank. The sixth and seventh page of Exhibit 4-p are a Form 1040X, an “Amended
U.S. Individual Income Tax Return” which Hoang apparently filed on November
18, 2010. However, all amounts stated on the document are zeroes.
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The eighth and ninth page of Exhibit 4-p appear to be yet another Form
1040X; this one apparently filed on April 29, 2011. In this document, Hoang
claimed that he had gross proceeds of $12,412,898.92 from the sale of securities
through the brokerage firm Scottrade. Hoang also asserted that his records from
Scottrade showed total securities purchases in the amount of $12,674,848.06. In
parenthesis, Hoang designated this amount as the cost basis for the securities he
sold through Scottrade in 2006. With that premise, Hoang claimed a capital loss of
$261,950.74 for the year 2006.
This same document also referenced an Exhibit A and an Exhibit B as
attachments, and it appears that Hoang included these two attachments as the tenth
and eleventh page of Exhibit 4-p. The tenth page has a handwritten “Exh A” on
the bottom and appears to be one page of a “Composite Substitute 1099 Statement”
issued by Scottrade for the year 2006. It appears to be “page 2” of a multi-page
document. It also does not show the name of the Scottrade account holder.
However, the document does indicate proceeds of $12,412,898.92 from the sale of
“stocks, bonds, etc.”
The eleventh page of Exhibit 4-p has a hand-written “Exh B” on the bottom
and appears to be “page 47” of a multi-page document issued by Scottrade. The
document is entitled “Supplemental Information” for the year 2006. It, too, does
not show the name of the Scottrade account holder. The document does, however,
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state “Total Purchases” of $12,674,849.06. But it does not indicate how the
$12,674,849.06 amount was determined, except with respect to three 2006
purchases of Walgreen Company stock and eight 2006 purchases of Xerox
Corporation stock. For each of these eleven transactions, the dates, share
quantities, and dollar amounts are listed. The total amount for these eleven
purchases is $211,198.00.
The twelfth page of Exhibit 4-p is difficult to identify: it appears to be “page
3” of an answer or response to factual allegations. Finally, the thirteenth and last
page of Exhibit 4-p appears to be a part of the petition Hoang filed in Tax Court on
November 1, 2010.
Hoang sought to admit Exhibit 4-p into evidence. But the Tax Court
excluded Exhibit 4-p in its entirety, concluding that the documents appeared
incomplete and altered, lacked authentication, and—in any event—had not been
provided before trial.
The Tax Court also struck all testimony that was based on Exhibit 4-p. As
such, the Tax Court ruled inadmissible Hoang’s testimony that he filed an amended
2006 tax return in April of 2011 showing “a capital loss of $200,000” and Hoang’s
attempt to support this assertion with the two pages of Scottrade documents (“Page
2” or “Exh A” and “Page 47 or “Exh B”) he attached to this amended 2006 tax
return.
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Before excluding this testimony, the Tax Court reviewed the two pages of
Scottrade documents and inquired whether the IRS could use them to compute a
cost basis for the securities Hoang sold in 2006. Counsel for the IRS indicated that
the IRS would “love to do that” but these two pages were plainly insufficient. The
two pages did not indicate how much Hoang paid for each of the securities he sold
in 2006.
E. The Tax Court’s Decision
After the trial, the Tax Court issued a thorough 48-page memorandum with
findings of fact and an opinion. The Tax Court found, among other things, that the
August 2010 notice of deficiency was timely and correctly determined that Hoang
had $14,857,461 in capital gains during the 2006 tax year. The latter
determination was established through the IRS’s request for admission that Hoang
“receive[] $14,857,461 in capital gains during the 2006 income tax year.” Hoang
had several opportunities to show why this admission sought by the IRS was not
true—but he failed to do so. This failure justified deeming the requested
admission established.
Alternatively, the Tax Court explained that even if this request for admission
had not been deemed established, Hoang would have failed to meet his burden of
showing that the IRS’s determination of his 2006 capital gains was incorrect. The
Tax Court found that Hoang presented “no evidence to allow [the Tax Court] to
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estimate the cost bases of the securities sold in 2006.” The Tax Court therefore
concluded “that Hoang had capital gains of $14,857,461 as that amount is
calculated in the notice of deficiency.”
The Tax Court then determined that Hoang (1) had a tax deficiency for the
year 2006 in the amount of $5,188,587; (2) was responsible for an addition to tax
in the amount of $1,297,533.50 because he filed his 2006 tax return 22 months past
the due date; and (3) incurred a $1,037,717.40 penalty for understating his tax
liability on his tax return.
Hoang timely appealed to this Court.
II. DISCUSSION 2
A. Statute of Limitations
Hoang contends that the IRS’s notice of deficiency, dated August 3, 2010,
was time barred as to the 2006 tax year. We disagree.
Once a taxpayer has filed a tax return, the IRS has three years to assess taxes
against that taxpayer. 26 U.S.C. § 6501(a). This three-year period applies
“whether or not such return was filed on or after the date prescribed.” Id. But if
the taxpayer fails to file a return, the tax may be assessed “at any time.”
2
Hoang’s pro se appellate brief is, at times, difficult to follow. Given Hoang’s pro se
status, we have liberally construed his arguments. See Tannenbaum v. United States, 148 F.3d
1262, 1263 (11th Cir. 1998).
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Id. § 6501(c)(3). Put differently, the three-year statute of limitations begins to run
if and when the taxpayer files a tax return.
Here, the evidence showed that Hoang did not file a 2006 tax return until
September 2, 2009. The IRS filed its notice of deficiency on August 3, 2010, less
than three years after September 2, 2009. As such, the IRS timely filed the notice
of deficiency.
Hoang argues that he filed a tax return in April 2007 and, therefore, the
statute of limitations expired in April 2010. But the evidence does not support
Hoang’s contention. Instead of a tax return, Hoang filed only an application for an
extension in April 2007—which does not trigger the statute of limitations. The
Tax Court therefore correctly ruled that the IRS’s notice of deficiency was timely.
B. Hoang’s 2006 Tax Liability
The IRS calculated Hoang’s 2006 tax liability of $5,188,587 based on its
determination that Hoang had $14,857,461 in capital gains. The IRS based this
capital-gains determination on the various Form 1099s submitted by Hoang’s
brokerage firms, indicating that Hoang received at total of $14,855,797 in proceeds
from security sales during 2006. Without any evidence of a cost basis, the IRS
treated the entire $14,855,797 in sales proceeds as capital gains and calculated
Hoang’s 2006 tax liability accordingly.
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The Tax Court correctly upheld the IRS’s capital-gains determination for
two reasons. First, the IRS served a request for admission asking Hoang to admit
that he indeed had capital gains of $14,857,461 in 2006. Hoang had many
opportunities to show why this requested admission was incorrect. He never did—
even though the Tax Court expressly and repeatedly urged him to do so.
Accordingly, we cannot say that the Tax Court erred in deeming the request for
admission established.
Second, the IRS’s determination of Hoang’s 2006 capital gains was
correct—even without the request for admission. An IRS determination in a notice
of deficiency has “the support of a presumption of correctness,” and Hoang, as the
petitioner, “ha[d] the burden of proving it to be wrong.” Welch v. Helvering, 290
U.S. 111, 115, 54 S. Ct. 8, 9 (1933); Bone v. C.I.R., 324 F.3d 1289, 1293 (11th
Cir. 2003) (“[T]he Commissioner’s determinations in his notices of deficiency were
entitled to a presumption of correctness, and Taxpayers bore the burden of proving,
by a preponderance of the evidence, that the Commissioner’s determinations were
incorrect.”); see Tax Court Rule 142(a)(1) (“The burden of proof shall be upon the
petitioner, except as otherwise provided by statute or determined by the Court . . .
.”).
Again, Hoang had multiple opportunities to come forward with evidence
showing that the IRS’s calculation of his 2006 capital gains was wrong. But
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Hoang never presented evidence of a cost basis for the securities he sold in 2006—
notwithstanding the Tax Court’s repeated warning that he must do so. Given
Hoang’s failure to provide evidence of a cost basis, the Tax Court correctly upheld
the IRS’s capital gains determination. See Better Beverages, Inc. v. United States,
619 F.2d 424, 428 n.4 (5th Cir. 1980) (“Where the taxpayer fails to carry this
burden to prove a cost basis in the item in question, the basis utilized by IRS,
which enjoys a presumption of correctness, must be accepted even where, as here,
the IRS has accorded the item a zero basis.”). 3
Hoang’s only attempt to provide cost-basis information was his trial
testimony based on four of the 13 pages of documents contained in Exhibit 4-p.
As described in detail above, Hoang presented (1) an amended 2006 tax return
apparently filed in April 2011 (Form 1040X); (2) the one-page Scottrade
“Composite Substitute 1099 Statement” for the year 2006 (“Exh A” or “page 2”);
and (3) the one-page “supplemental information” provided by Scottrade (“Exh B”
or “page 47”).
The Tax Court excluded Exhibit 4-p because it contained documents that
were incomplete, altered, and unauthenticated. The Tax Court also struck Hoang’s
testimony based on these documents. We need not decide whether the Tax Court
3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this Court
adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior
to the close of business on September 30, 1981.
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correctly excluded this evidence because, even if admitted, it would not meet
Hoang’s burden of establishing a cost basis for each of the securities he sold in
2006.
One reference on the April 2011 amended 2006 tax return summarily claims
“total purchases” and a cost basis of $12,674,849.06. There is no itemization of
what securities are in that lump-sum cost basis, much less a calculation of what a
particular security cost and for how much it was sold. Thus, Hoang’s assertion of a
cost-basis in his amended tax return is not enough to overcome the presumption of
correctness afforded to the IRS’s August 2010 notice of deficiency.
The only support Hoang offered for this cost-basis assertion was the one-
page “Supplemental Information” (“Exh B” or “page 47”). This document states
“Total Purchases” of $12,674,849.06, but it does not explain how this particular
number was calculated. It lists only eleven security purchases totaling $211,198.
This document would not allow the IRS to match each of Hoang’s 2006 sales of
securities with a corresponding purchase. At best, the document could suggest that
Hoang bought a total of $12,674,849.06 in securities through Scottrade in 2006.
But that in no way establishes how much Hoang paid for each of the securities he
sold in 2006. As such, the document falls far short of providing cost-basis
evidence sufficient to rebut the presumption of correctness enjoyed by the IRS’s
notice of deficiency.
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In light of Hoang’s failure to provide evidence of a cost basis for the
securities he sold in 2006, we must affirm the Tax Court’s determination of
Hoang’s 2006 tax liability.
C. Hoang’s Remaining Contentions
Throughout his brief, Hoang discusses two “grievances” he allegedly filed in
2007. The “grievances” are, ostensibly, the two reasons Hoang listed in his April
2007 request for an extension to file his 2006 tax return. Both appear to relate to
prior controversies between Hoang and the IRS. First, Hoang explained that he
was waiting for the IRS to issue a corrected taxable income for a prior tax year.
Second, Hoang stated that he was waiting on instructions from the Tax Court “on
how to switch from accrual method to cash basis with regard to reporting taxable
interest/capital gains (losses).”
We fail to see the legal significance of either one of Hoang’s “grievances.”
Whatever their merit, neither “grievance” relieved Hoang from his basic duty to
file an accurate and timely tax return for the year 2006. Nor did Hoang’s
“grievances” discharge Hoang of his burden to present evidence of a cost basis to
rebut the presumption of correctness afforded to the IRS’s notice of deficiency.
The Tax Court correctly rejected Hoang’s arguments premised on the two
“grievances.”
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Similarly, we find no merit in Hoang’s argument that the Tax Court erred in
denying Hoang’s motion to approve his “counterclaims” against the IRS. Hoang’s
motion was “For an Order Suppressing the Notice of Deficiency and Adjudicating
[His] Counterclaims Against [the IRS] and Referring Criminal Malfeasance to
Federal Law Enforcement.” The Tax Court denied this motion as procedurally
defective because it combined several types of requests and addressed the merits of
prior motions. In his brief, Hoang does not make any arguments that his filing was
procedurally correct or did not address the merits of prior motions. Accordingly,
Hoang has abandoned any such argument. See Timson v. Sampson, 518 F.3d 870,
874 (11th Cir. 2008) (noting that “issues not briefed on appeal by a pro se litigant
are deemed abandoned”).4
AFFIRMED.
4
We also find no merit in Hoang’s arguments regarding the Tax Court’s own civil or
criminal liability.
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